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2012 01

I have a piece in The Conversation arguing that the relative decline of manufacturing is a sign of economic progress:

The manufacturing share of developed economies has been in decline for decades. But that does not mean that manufacturing output has been declining in an absolute sense. Far from it. In the United States and the United Kingdom, manufacturing output was at record levels prior to the onset of the financial crisis. Manufacturing employment has fared less well, but this is symptomatic of substantial long-term productivity gains in this sector, not declining absolute levels of output.

Manufacturing has also been declining steadily as a share of world GDP. This should not be surprising. It is driven by much the same process that saw a decline in the agricultural share of GDP during the 19th and 20th centuries with the onset of industrialisation. As incomes grew, the share of food and other agricultural goods in consumption and production declined. The same is now happening with manufactured goods, as a greater of share of rising incomes is allocated to services.

Doubling an MEP’s salary increases the probability of running for reelection by 23 percentage points and increases the logarithm of the number of parties that field a candidate by 29 percent of a standard deviation. A salary increase has no discernible impact on absenteeism or shirking from legislative sessions; in contrast, non-pecuniary motives, proxied by home-country corruption, substantially impact the intensive margin of labor supply. Finally, an increase in salary lowers the quality of elected MEPs, measured by the selectivity of their undergraduate institutions.